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Roberto Bell's Articles in Real Estate

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  • How to Succeed in Real Estate Lead Generation
    When one talks about real estate as a business, it is unavoidable to think about how highly competitive the industry is. Since economic situations are dynamic and rapidly change...
  • Useful Tips For Successful Real Estate Lead Generation
    The real estate industry is often considered as volatile, such that trends can change immensely, influencing either positive or negative outcomes, and overall affecting the state of...
  • Staying On Top Of The Real Estate Market
    21st century real estate is filled with exciting opportunities for agents who have acknowledged the impact of the Internet on their industry.
  • Housing and Economic Recovery Act of 2008 Did Not Work
    In late July 2008, Congress passed and the President signed the Housing and Economic Recovery Act of 2008 that included the following provisions: Federal Housing Finance Regulatory Reform Act of 2008, HOPE for Homeowners Act of 2008, and the Foreclosure Prevention Act of 2008. These programs did not accomplish what they set out to do.
  • Hope Now? The Big Lies of the Housing Bubble
    The first of the numerous bailout programs was "Hope Now" introduced in October of 2007. As the name suggests, Hope Now was sold to the general public as a reason for them to hang on and continue making crushing payments for as long as possible. It was a false hope, but even false hope gave homeowners a little emotional relief, and it provided a few more payments to the lenders. According to their website, "HOPE NOW is a cooperative effort between counselors, investors, and lenders to maximize outreach efforts to homeowners in distress." The plan was to streamline the process of negotiating workouts between lenders and borrowers to keep borrowers making payments and ostensibly to stop them from losing their homes. The emphasis was on making payments and maximizing investor value in collateralized debt obligations. Very few people benefited from the program, despite government claims to the contrary, and no rights or benefits were conferred to borrowers that they did not already contractually have. There was much fanfare when it was first announced, but the program did far too little to have any impact on the housing market.
  • Conspicuous Consumption - It's a California Thing
    So what happens when you give poor people money? They spend it. The stories of people who won the lottery and managed to spend themselves into bankruptcy a few years later are classic examples of the pathology of the beliefs of spenders. A great many Californians are spenders. This is why California has a strong cultural pathology.
  • The Fear Stage in a Financial Bubble
    There are many identifiable stages in a financial mania. These include: enthusiasm, greed, delusion, denial, fear, capitulation, and despair. The most important change in the market in the fear stage is caused by the belief that the rally is over. Price rallies are a self-sustaining price-to-price feedback loop: prices go up because rising prices induces people to buy which in turn drives prices even higher. Once it is widely believed that the rally is over, it is over. Market participants who once only cared about rising prices suddenly become concerned about valuations. Since prices are far above fundamental values and prices are not rising, there is little incentive to buy. The rally is dead.
  • Housing Bubble Deflation - The Stages of Grief
    Markets are the collective actions of individuals, and the psychology of the markets can be broken down to the psychology of the individual participants who make it up. When price levels in a financial market collapse, most people lose money. Any loss has a psychological impact on the individual causing her to experience grief. The grieving process is generally divided into several overlapping stages: denial, anger, bargaining, and acceptance. These stages are also apparent in the mass psychology of the market.
  • Ahwatukee Arizona Real Estate Market Improving Significantly
    Ahwatukee appears to be shoring up elements of its housing market as buyer demand intensifies. This should more directly result in lower inventory and higher Ahwatukee home sales though the impact from future foreclosures remains uncertain.
  • Adjustable-Rate Mortgage Resets Deflated the Housing Bubble
    The loan reset issue is not confined to those who bought late in the bubble rally of the Great Housing Bubble. Many borrowers are homeowners who refinanced to take advantage of more favorable loan terms. Most loans originated in the later stages of the bubble rally were adjustable rate mortgages. When these mortgages reset to higher payments, most borrowers defaulted, and their properties went into foreclosure.
  • Subprime Foreclosures Burst the Housing Bubble
    The first sign of trouble for the housing market was the implosion of subprime in early 2007. Subprime borrowers stopped paying back the loans they were given due to loan resets and payment recasts. These defaults lead to foreclosures. During the bust, the vast majority of properties at auction went back to the lenders because the loan amounts usually exceeded market value. Properties purchased by the lender at a foreclosure auction are called Real Estate Owned or REO.
  • The Affordability Limit in Residential Real Estate Markets
    Affordability is the ultimate limit of any asset bubble. If prices are so high that no buyer can afford them, there are no transactions and thereby no market. The fear of many buyers in a financial mania is that prices will remain elevated to the absolute limit of affordability permanently. People who have this fear will put every available resource into getting a house before this happens. This becomes a self-fulfilling prophecy as prices get bid higher and higher by fearful buyers.
  • Debt-To-Income Ratios and Residential Real Estate
    The cumulative impact of the decisions of buyers is represented in the debt-to-income ratios, how much each household pays to borrow versus how much they make. Comparing the trends in debt-to-income ratios provides a great tool for elucidating the behavior of buyers.
  • Price-To-Income Ratios as a Measure of Residential Real Estate Value
    Price-to-income ratios represent the amount borrowed relative to the incomes of the borrower. There are many variables that impact house prices, and some of the variability in prices over time can be attributed to changes in these variables; however, since most houses are purchased with lender financing, and since lender financing is linked to income, the price-to-income ratio is the best metric for evaluating long-term housing price trends. The price-to-income ratio does not need to be adjusted for inflation as both prices and income will rise with the general level of inflation. Most of the fluctuations in the ratio are based on changes in financing terms, in particular interest rates, and of course, irrational exuberance.
  • The Great Housing Bubble - Who is Responsible?
    Who is responsible for the Great Housing Bubble? It is one thing to identify who or what caused the bubble, but it is another to assign responsibility and blame. Borrowers, lenders, investors, and the FED are all responsible; it is only a matter of degree.
  • Visualizing the Real Estate Bubble
    The Great Housing Bubble can be visualized with a simple thought experiment. Imagine a room with 100 people representing the pool of subprime borrowers. These are new entrants to the market. They were previously unable to buy due to bad credit, lack of savings, and other reasons. All of them are told they are going to bid on an asset that never goes down in value, and they will be given the ability to borrow unlimited funds (stated-income "liar loans") The only caveat is the borrowed money must be paid back when the asset is sold (not that they care, they already have bad credit). Imagine what happens?
  • The Gilbert Arizona Real Estate Market is Showing Significant Improvement
    Gilbert, Arizona's real estate market is experiencing significant improvement in home sales activity with lower home inventory and higher home sales.
  • Residential Appraisals and Collateralized Debt Obligations
    There are three methods of appraising the resale value of residential real estate: the comparative-sales approach, the cost approach, and the income approach. The comparative-sales approach uses recent sales of similar properties in the market because comparable sales reflect the behavior of typical buyers in the marketplace. The cost approach determines market value by calculating the replacement cost of an identical structure plus the cost of the land or lot upon which the house would sit. The income approach determines market value by analyzing market rents of comparable properties and applies the gross rent multiplier of expected rents. Most lenders give the greatest weight to the comparable sales approach when establishing market value before applying any loan-to-value limitations to the loan amount. The income approach is generally only considered for non-owner occupied homes. The three-test approach to appraising market value as used during the Great Housing Bubble is fraught with risk and is seriously flawed.
  • The Inflation Premium for Residential Real Estate
    Residential housing does have a cash-saving value, if financed with a fixed rate mortgage. Over time, the growth in income and rents increases the cost of housing for renters. The inflation of housing costs for renters is greatly lessened for homeowners using a fixed-rate mortgage because their housing costs are effectively frozen at the rate of their ongoing mortgage payment. Other costs of home ownership, such as property taxes, insurance and maintenance do still rise with inflation, but since the mortgage payment is about two-thirds of the cost of ownership, fixing this amount provides a large benefit. Over time, the savings accruing to homeowners from a level housing payment can be quite substantial. Applying the technique of discounted cashflow analysis, this savings over time can be evaluated.
  • How to Choose Between Using a Property Management Firm or Becoming a Landlord
    With the prices of real estate plummeting, the next several years may witness another upsurge in the number of young professionals entering the real estate market as an investment and/or earnings vehicle.
  • What is a down payment
    The Down Payment A down payment is money that the buyer must pay up front to buy a home.
  • Closing Costs
    When you close or finalize a mortgage there are many fees, taxes and insurance costs that you will need to pay. These are called closing costs.
  • If You Are Underwater but Can Afford the Mortgage Payment You Should Hang On
    Anyone that can manage their payments should consider trying to hold on, even if the house value has dropped well below their purchase price. There are still a great many overextended homeowners and speculators who cannot possibly manage their payments, and for them trying to hold on until the market comes back is a foolish waste of time and resources. The market is not going to come back before they go under. However, for those who can make the payments, there emotional benefit of home ownership may be worth the financial hardship it entails.
  • Regulating Loan Amounts Would Help Prevent the Next Housing Bubble
    The parameters of the forming limitations on the debt-to-income ratio and combined-loan-to-value are essential to prevent bubbles in the housing market and to prevent the banking system from becoming imperiled in the future. Loan amounts much be tethered to incomes and limited by existing property values. Without these limits, prices can take flight with lender capital. During the crash, lenders saw values drop below their loan amounts, and they lost a great deal of money.
  • Strict Loan Documentation Standards Will Help Prevent the Next Housing Bubble
    One of the most egregious practices of the Great Housing Bubble was the fabrication of income by borrowers that was facilitated and promoted by originating lenders. Stated-income loan programs were widespread, and they were the cause of much of the uncertainty in the secondary mortgage market during the initial stages of the credit crunch in the deflation of the bubble. Basically, investors had no idea if the borrowers to whom they had lent billions of dollars were capable of paying them back.
  • Regulatory Solutions to Prevent the Next Housing Bubble
    The regulatory solution proposed herein is simple, yet far reaching. It comes in two parts, the first is to limit the amount lenders can loan to borrowers with a rather unique enforcement mechanism, and the second is to increase the penalties for borrowers who commit mortgage fraud. The following is not in legalese, but it contains the conceptual framework of potential legislation that could be enacted on the state and/or federal level.
  • Housing Bubble Economic Problems - Have We Seen the Worst?
    The foremost problem resulting from the deflation of the Great Housing Bubble was the imperilment of our banking and financial system. The bailouts emanating from Congress have mostly focused on keeping the banking system solvent. Considering most institutions were secretly bankrupted by the housing collapse, this was not small problem. The economic ramifications are severe, and 2009 will likely not be the end of the crisis.
  • What to Do When the Sale Price of a Home Does Not Pay Off a Mortgage
    Once a price decline gets underway many buyers who were late to the price rally find they are in a property worth less than they paid for it. As prices continue to fall, many find themselves "underwater" owing more on their mortgage than their property is worth. When these late buyers want to become sellers, they cannot sell and pay off the mortgage balance with the proceeds from the sale. Then they have a real problem.
  • How to Decide if an adjustable rate mortgage is Right for You
    An adjustable rate mortgage, called an ARM for short, is a mortgage with an interest rate that is linked to an economic index.
  • The Home Mortgage Interest Deduction is Widely Overestimated and Misunderstood
    Debt subsidies, in particular the home mortgage interest deduction, are seen as a great benefit to home ownership. The benefit is widely overestimated and misunderstood.
  • Renting Versus Owning Residential Real Estate
    Renting versus owning is both an intellectual, financial decision and an emotional decision. The financial decision is first and foremost an analysis of the comparative cost of renting versus owning. It makes no sense to pay more than rental equivalence to own residential real estate. Many people still do because they are chasing the fantasy of endless appreciation and real estate wealth, but most of these people will find the increased cost of ownership over time negates any appreciation advantage they may obtain. Also, many people have found out painfully that property does not always appreciate in value.
  • 10 Reasons Why You Should Invest in Costa Rica Real Estate
    I have been living in Costa Rica for 3 years now. Here is 10 reasons for you to invest in properties in Costa Rica.
  • Bring Back Paternalism in the Mortgage Market
    As a society, we have created a system that strongly encourages a borrow-and-spend mentality. Saving in all its forms are punished while borrowing is strongly subsidized and encouraged. The credit orgy of the 00s saw this system taken to its ultimate extreme. The result was a vicious credit crunch, a collapse in asset values, and an economic downturn second in severity only to the Great Depression. Obviously, something needs to change. A little paternalism in the mortgage market is one of a number of necessary regulatory reforms.
  • Interest Rate Resets on an Adjustable Rate Mortgages Are a Problem
    Many people took out adjustable rate mortgages during the Great Housing Bubble. After 25 years of steadily declining interest rates, people forgot about, or never knew about the risk of rising interest rates and what it would do to their housing payments. Adjustable rate mortgages are great while interest rates are declining. Their payments are lower than fixed rate mortgages, and as interest rates decline, they become an even better deal. However, when interest rates go up again, these loans will become a nightmare.
  • Real Estate Investment versus Real Estate Speculation - What is the Difference?
    Owner-occupied residential real estate is viewed by many people as a good investment. Realtors often use this idea as part of their sales pitch. This view is fallacious and it is one of the beliefs responsible for creating an asset price bubble. To understand why houses are not a great investment in most circumstances, one needs to understand the difference between investment and speculation.
  • Higher Interest Rates and Residential Real Estate Markets - What Would Happen?
    A key factor impacting the fundamental value of housing and thereby the bottom is interest rates. Higher interest rates would devastate residential real estate markets. When interest rates go up, the amounts borrowed go down assuming a consistent payment. As amounts borrowed go down, so do real estate prices.
  • Debt-to-Income Ratios Impact on Residential Real Estate Markets
    The debt-to-income ratio is a measure of how far buyers are "stretching" to buy real estate. Buyers have historically committed larger sums to purchase real estate when prices are rising in order to capture the appreciation of rising prices. Conversely, buyers have historically committed smaller and smaller percentages of their income toward buying real estate when prices are declining because there is little incentive to overpay. Some may look at this phenomenon as a passive effect of the rise and fall of prices, but since buying is a choice, the fluctuation in debt-to-income ratios is an active force on prices in the market.
  • Hyperinflation and the Housing Market
    The Federal Reserve under Ben Bernanke began aggressively lowering interest rates at the end of 2007 in response to the severe economic downturn caused by the collapse of house prices and the related difficulties falling house prices had on the banks and other institutions that made loans using houses as collateral. Many are concerned that these policies will ignite a period of hyperinflation in the United States.
  • Housing Market Bottom - Price-to-Rent Ratio Estimates
    Comparative rent is the primary method of evaluating the fundamental value of any property. The price-to-rent ratio links the cost of ownership with the cost of rental. This link is direct because possession of property can be obtained by either method. The cost of ownership encapsulates all of the financing terms and other variables associated with possession of real estate as does the cost of rental. Price-to-rent ratio fluctuates over time as changes in the cost of ownership and terms of financing makes financing amounts vary and house prices vary as well.
  • Housing Market Bottom - Price Action Estimates
    Most market participants focus on price action. The price-to-price feedback mechanism largely responsible for bubble market behavior gathers its strength from an awareness of market pricing, and the widespread belief that short-term, past price performance is predictive of long-term, future price performance. It is a fallacy that is often reinforced in the short-term as irrational exuberance takes over in a market, but over the long term, short-term price movements rarely correspond to long-term price trends, and when they do, it is only by chance.
  • House Prices Fall - How Low Will They Go?
    Despite the difficulty in market forecasting, many who have examined the residential real estate market point to continued declines through 2009 and beyond. The most likely scenario has resale residential real estate markets bottoming in 2011 at prices 30% off the peak nationally.
  • Future House Prices are Dependent upon Future Loan Terms
    Every homebuyer operating in the deflation of the Great Housing Bubble needs to consider what loan terms will be available in the future. At some point, most buyers become sellers. The future buyer will likely need to borrow most of the money necessary to complete a real estate transaction. The availability of credit and the loan terms this future buyer will face is the primary determinant of the price this buyer will pay for real estate.
  • Housing Bubbles as Cultural Pathology
    What is a Cultural Pathology? There are certain beliefs if widely held and acted upon by a group of people leads inevitably to collective suffering and personal destruction. The housing bubble was a form of cultural pathology. It spawned a number of beliefs and actions that caused people to lose their houses in foreclosure.
  • Housing Bailouts are False Hopes
    One of the more interesting phenomena observed during the bubble was the perpetuation of denial with rumors of homeowner bailouts. The bailout rumors were false hopes provided by the government to allow homeowners in hopeless situations a brief respite before they faced losing their homes in foreclosure.
  • Chandler Real Estate Market Showing Signs of Possible Recovery
    Chandler real estate is a bright spot in the Phoenix housing market and looks like it is weathering the downturn better than other local housing sub-markets. Indeed, there are indicators that suggest that Chandler may have seen the bottom of the market and that 2009 could be a stronger year for Chandler in terms of residential real estate.
  • The Need For Research When Conducting A Free Property Valuation
    A look at methods to find the value of a property and how detailed research is needed should an accurate figure be found.
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